The NHS will have to shed around 137,000 jobs – almost a tenth of its workforce – if it is to meet planned efficiency savings of £20bn, the Department of Health has been warned.

The severity of cutbacks needed by 2014 was contained in advice presented by management consultants McKinsey to the government this spring.

The content of the document, obtained by the Health Service Journal, was not disputed today but the health minister Mike O'Brien insisted the government had already rejected the proposal.

He said: "In core frontline services, like maternity, nursing and primary care, we need more staff rather than fewer."

Attempting to distance themselves from the report, ministerial sources suggested the review had been commissioned without full ministerial authority.

It is understood that the report was ordered by Mark Britnell, who until recently was a senior NHS official based at the Department of Health. Britnell, a high flyer tipped as a future chief executive of the NHS, resigned from the service in June to take up a post with KPMG, a management consultancy.

The paper, already circulated by the department to senior NHS managers, suggested that large numbers of both frontline clinical staff and administrators could lose their jobs. The headline figure has been mentioned before, but has not previously been translated into axed posts or areas targeted for savings. The report recommended a range of "potential actions", including a recruitment freeze, a reduction in medical school places and an early retirement programme to encourage older GPs and community nurses to make way for "new blood/talent".

As much as £2.4bn could be saved, McKinsey said, if hospitals with the lowest levels of staff productivity pulled themselves closer to the average.

The study suggested that at any one time, nearly 40% of patients in a typical hospital did not need to be there. The main reasons for their presence were identified as delays in providing hospital tests or therapies, and lack of suitable care at home or in the community.

Cutting back on hospital appointments would deliver a further £600m in savings, stripping out around 4 million of the 29 million follow-up outpatient appointments every year. An additional £700m could be saved if procedures with limited clinical benefits – such as tonsillectomies, varicose vein removal and some hysterectomies – were no longer performed.

Acute hospital care was most heavily targeted, with suggestions that 38% could be saved. The report also suggested that up to £8.3bn of hospital estates could be "freed up" by being sold off.

McKinsey described the document as a "leaked presentation" but declined to comment on its contents.

The health minister Mike O'Brien said: "[We] have rejected the suggested proposals in the McKinsey report and there are no plans to adopt these proposals in the future.

"The government does not believe the right answer to improving the NHS now or in the future is to cut the NHS workforce. In core frontline services like maternity, nursing and primary care we need more staff rather than fewer.

"It is absolutely right that every government department looks for efficiency savings and examines all avenues. In the NHS, our reforms are already delivering billions of pounds of efficiencies. Making further savings would mean we can reinvest across the NHS where it is most needed."

The Conservative health spokesman, Andrew Lansley, said: "Yet again, Labour ministers are failing to be straight with the British people. Andy Burnham [the secretary of state] promised to protect the NHS, but now we find out that his department has been drawing up secret plans for swingeing cuts.

"Clearly we need to get better value for money from the NHS, so we applaud any drive for greater efficiency. But it is extraordinary that Labour plans to take an axe to the hospital budget rather than to the bloated health bureaucracy. Only a fifth of job cuts would be within the bureaucracy, meaning the vast majority would be frontline NHS staff."

Dr Peter Carter, the Royal College of Nursing's chief executive, said: "These proposals are deeply worrying because recent studies show that there is a direct link between the number of nurses working on wards and patient deaths .

"When there are not enough nurses, patients are more likely to die or experience complications. It is reckless to think about reducing staff levels without considering in detail the impact on patient care."